Tuesday, 26 April 2016
Going out of Business : Insurance Issues
When you go out of business you need to consider what happens if someone makes a claim against you. You could disappear so you cannot be found for the claim to be made or you can buy Run Off insurance. This means you will pay a sum of more than twice your usual annual premium to walk away. If however you can persuade an existing business to buy your practice and take on the liabilities you wont need to pay a run off premium but the enlarged entity may be asked to pay a larger premium due to enlarged turnover but it wont kick in immediately and will depend on the increased turnover being achieved and will not be subject to anything other than the usual multiplier.
It therefore makes sense to give your practice away rather than close it. However if you are giving away a practice rather than selling it, prospective purchasers are going to be worried that there are all sorts of hidden liabilities and wont want to touch it. So you had better sell it for a price and agree some warranties about the extent of the liabilities. Now the question is can you get cover for the cost of the cap you place on your liability or keep a reserve from the sale price.